The ACT Party does not care if common people get into the jaws of loan sharks and perish but at least the National Party is beginning to believe that ‘something must be done’ to get middle and lower classes out of their predicament.
There are a number of horror stories concerning loan sharks and the harassment they wrought on people. Financiers and some politicians would say that those who advance loans were following the procedures set for recovery but the exorbitant interest that they charge warrants government intervention.
We regularly receive complaints from hapless borrowers but the loan contracts that they have signed are legally enforceable and hence we have no right to intervene except to persuade the Government to act.
Fresh guidelines
Financial Services Federation (FSF), a grouping of Non-Bank financial institutions issued a new set of guidelines on May 2 to offer greater protection to consumers and lift the standards of consumer credit.
Experts believe that these new guidelines could be a deterrent against loan sharking practices, enabling consumer to lodge complaints against lending companies, even if they are not signatories to the guidelines.
These guidelines are on the Federation website www.fsf.org.nz
Welcoming the move, Susan Taylor, Chief Executive of the Financial Services Complaint Limited (FSCL), an independent, not-for-profit External Dispute Resolution body, said 36 members of FSF, including major lending companies such as GE Money and DTR will be obliged to follow the guidelines.
“As of December 2010, any person or organisation that provides financial service to a member of the public has to register with the Companies Office as a financial service provider and belong to an approved dispute resolution scheme like the FSCL,” she said.
National MPs applaud
Last week National MPs Kanwaljit Singh Bakshi and Dr Cam Calder joined the chorus welcoming the new set of guidelines.
“During the recession many Kiwis have fallen on hard times and borrowed money as a last resort. But high-interest loans often trap people in an increasing spiral of debt,” they said.
They said that a number of their constituents (in Manukau East and Manurewa) were among the victims of loan sharks.
“A number of our constituents are incapable of repaying their debts. These loans should never have been granted,” they said.
“The new Responsible Lending Guidelines have been put together by the Ministry of Social Development and the Financial Services Federation. They educate people on what to expect when they apply for a loan.
“We are aware that some loan sharks charge a weekly interest of 8%, adding up to more than 400% per annum. The new guidelines call for better consideration of loan security, and interest rates that are more transparent. People should know exactly how much a loan will cost them,” Mr Bakshi and Dr Calder said.
Labour attacks
But the real credit to making this a broad issue belongs to Labour MP Carol Beaumont who launched an attack on loan sharks last year (Indian Newslink, July 15, 2010).
“Predatory loan sharks are targeting struggling families throughout New Zealand. This problem is particularly acute in these tough economic times in which ordinary people find it hard to make ends meet, with ever-rising prices and reduced or static incomes,” she had said in the article.
Ms Beaumont, who is the Consumer Affairs Spokesperson for her Party, said that she had heard of people who were unable to keep up payments but were being pressurised to do so.
“Imagine borrowing $3200 to pay for car repairs and ending up with no car but a total debt of $9800,” she said.
Ms Beaumont did not seem happy with the new guidelines.
She accused National of ‘missing another opportunity to hold sharks to account.”
“While the Responsible Lending Guidelines released by the Financial Services Federation are a step in the right direction and those involved in creating them are to be congratulated, National is doing nothing to stop these predatory lenders in their tracks.
“The Government’s endorsement of these guidelines represents a half-hearted attempt to look proactive in the face of an increasing and serious problem in the consumer sector,” she said.
While the guidelines are voluntary and a promising initiative, the Government must legislate against the excessive behaviour shown by the worst predatory operators, Ms Beaumont said.
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Keep your head above water Protect Yourself From Loan Sharks If you cannot afford, do not buy Plan a realistic budget and stick to it Have a savings plan Keep your credit rating high Be skeptical about quick fixes and easy money Never sign documents that are incomplete or illegible Do not get into a debt trap Beware of the temptingly low interest rates There is more at www.fsf.org.nz |
